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Thursday, September 17, 2009

Comments

I'm not an economist, so I'm mostly puzzled by this too, though I try to understand as best as I can.

Sure, it may seem that there is economic benefit to keeping construction workers employed, and that ripples throughout the economy (flooring, carpet, lumberyards, plumbing, landscapers, etc) Assuming that people are buying new construction while letting existing homes sit on the market. But like you said, at some point, busy work for the sake of being busy doesn't not produce something of value if glut on the market reduces the overall value of the house.

And if housing prices fall as a result of this, we'll probably end up with more people with negative equity in their homes, maybe get some more foreclosures on people who decide to bail out and leave the banks with the houses... No?

Or perhaps I don't know what I'm talking about with my poor understanding of how the economy works.

I think you understand it perfectly. I think the financial industry and fed government are simply in denial.

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